Easy Forex

Opportunity to Sell Yen?

China’s robust economic growth rate yesterday sparked fresh demand for the yen, which often trades as a proxy for the renminbi. A closer look at this recent strengthening of the yen reveals an opportunity to sell the currency against its higher-yielding counterparts, such as the euro, sterling, Aussie and to a lesser extent, the dollar. We are not anticipating additional rate hikes from the Bank of Japan this year and expect the incoming data to remain mixed at best. On the other hand, the ECB, BoE and RBA are all seen further tightening policy in order to rein in inflationary pressure – thus widening the yield gap.

USDJPY recovered after dropping through the 118-level to touch the lower support line of its ascending channel from early March at 117.60. Additionally, the pair quickly bounced off its 200-day moving average located around the 118-level. Resistance for the pair begins at 119, followed by 119.50 and 119.80. Subsequent ceilings will emerge at 120, backed by 120.30 and 120.65. Support begins at 118, followed by 117.60, and 117.20. Subsequent floors are eyed at 117, backed by 116.50 and 116.35.